Interocean Oil Development Company and Interocean Oil Exploration Company v. Federal Republic of Nigeria

Case summary

At a glance

Parties: Interocean Oil Development Company and Interocean Oil Exploration Company (Delaware, U.S.A.) v. Federal Republic of Nigeria
Case no.: ICSID Case No. ARB/13/20
Forum and rules: ICSID Convention arbitration; ICSID Arbitration Rules 2006; place of proceeding London
Treaty: Nigerian Investment Promotion Commission Act (NIPC Act), Section 26 (consent in national legislation)
Tribunal: Prof. William W. Park (President), Prof. Julian D. M. Lew, Justice Edward Torgbor
Sector: Oil and gas (OML 98 and OPL 275 joint venture with NNPC)
Outcome: Jurisdiction upheld, but all claims dismissed on the merits (Award dispatched 6 October 2020).
Amount: Claimed: damages estimated at over USD 1 billion plus USD 500,000,000 in aggravated damages (the Request for Arbitration had estimated over USD 500,000,000 plus USD 150,000,000). Awarded: nothing. The Claimants must pay USD 660,129.87, which is Nigeria's share of the arbitration costs (total USD 1,320,259.74). Nigeria claimed costs of USD 3,767,446.36; no legal costs were awarded because its counsel acted pro bono, and its other costs were refused as unreliable.

The dispute

The Claimants are two Delaware companies. Through the Nigerian company Pan Ocean Oil Corporation, they held the 40% participating interest in Oil Mining Lease 98 and Oil Prospecting License 275, in a joint venture with the state-owned Nigerian National Petroleum Corporation (NNPC). Their owner, Dr. Vittorio Fabbri, died in 1998. Pan Ocean's Managing Director, Dr. Festus Fadeyi, then took control of the company. In 2005 the Federal High Court of Abuja authorised a board meeting, at which the 7,500 unissued shares were allotted to Dr. Fadeyi and his associates. The court validated the allotment on 8 February 2006, and the Corporate Affairs Commission (CAC) registered it. The Claimants argued that Nigeria, acting through the NNPC, the Ministry of Petroleum Resources, the CAC, the police and its courts, expropriated their investment indirectly, breaching the NIPC Act and customary international law (minimum standard of treatment, fair and equitable treatment, full protection and security). Nigeria objected to jurisdiction on several grounds: lack of consent, Pan Ocean's non-registration with the NIPC, wrong respondent, time bar and premature filing. On the merits it argued that the acts of Dr. Fadeyi and the NNPC were not attributable to it and that its organs had no duty or power to step into a private shareholding dispute.

Key holdings

Section 26 of the NIPC Act is a standing written offer to arbitrate. Its reference to the 'ICSID Rules' means arbitration administered by ICSID under the Convention, not merely a set of procedural rules. The Tribunal also rejected the objections on proper party (Nigeria remains the Contracting State even though it designated the NNPC) and on time bar (no limitation period applies to these international-law claims). It joined the objections on registration and premature filing to the merits. Decision on Preliminary Objections ¶¶ 63–66, 74–82, 111–117, 122–128, 147
In the Award, the Tribunal confirmed its earlier decision. It also rejected the remaining objections: the adequacy of the Claimants' acceptance of the offer and the existence of a dispute, registration (Objection 3) and premature filing (Objection 6). Award ¶¶ 391–394
The NNPC is a commercial entity and does not exercise governmental authority, so its conduct is not attributable to Nigeria. Nothing in statute, contract or regulation required the consent of the NNPC or the Minister to an allotment of shares in Pan Ocean. Neither had power to intervene in a shareholding dispute that was pending before the Nigerian courts. Dr. Fadeyi's conduct was not attributable to Nigeria either. Award ¶¶ 297–308, 323
The 2005 Board Meeting Case appears to have been legally wrong and unjust, but it was a miscarriage of justice, not a judicial expropriation. The Claimants did not prove that Nigeria was involved in Dr. Fadeyi's actions, and they abandoned their appeal instead of exhausting domestic remedies. Award ¶¶ 310–315
Nigeria did not act prudently: after the CAC report it did not investigate the situation at Pan Ocean. That failure alone does not make Nigeria responsible. The Claimants did not show that Nigeria was complicit in Dr. Fadeyi's plan or could have foreseen that it would deprive them of their investment. Award ¶¶ 320–322, 331–332
There was no breach of the minimum standard of treatment, fair and equitable treatment or full protection and security. The Tribunal did not rule on denial of justice because the Claimants dropped that theory. The 1987 detention of Mr. Rooks was not shown to be unlawful or connected to the loss. All claims for damages, restitution and reinstatement were dismissed. Award ¶¶ 353–359, 395–400
Costs: Nigeria prevailed, but it incurred no legal costs because Afe Babalola & Co acted pro bono, so none were awarded. Its claims for witness, travel and disbursement costs were refused as unreasonably high or implausible. The arbitration costs follow the event: the Claimants pay USD 660,129.87. Award ¶¶ 377–389